CBE Wrestles with Past as Reforms Test the Future of State Banking

Sep 6 , 2025.

Abie Sano, the quietly tough president of the state-owned Commercial Bank of Ethiopia (CBE), is a man accustomed to steering through storms. He spoke candidly about the immense pressures and opportunities facing the country’s largest bank as it claws back lost market share, charts regulatory upheaval, and absorbs the aftershocks of an industry roiled by the conversion of microfinance institutions into commercial banks. Running a bank with a towering balance sheet, now stretching beyond 2.3 trillion Br, Abe discussed issues where the line between public duty and commercial logic is as blurred as ever. His account of the reforms, most notably the transfer of non-performing public debts to the Treasury and the rebalancing of the loan book towards the private sector, was tinged with both relief and resolve. However, CBE's President did not shy away from the bruising realities. A brief bank run, liquidity ratios skirting regulatory minimums, and the stinging loss of deposits as former microfinance clients defected to the competition were some of them. Yet, through this crucible, CBE claims to have emerged with a sharper risk appetite, a stronger capital base, and the confidence to stare down both private rivals and the spectre of foreign banks entering the domestic crowded financial market.

Abe's conversation with Tamrat G. Giorgis, our managing editor, was as much about the future as it was about recovery. His vision, rooted in digital transformation, disciplined risk management, and a rejection of short-term fixes like high-cost fixed deposits, was counterbalanced by a candid acknowledgement of unresolved vulnerabilities. From the “unprecedented” 801 million Br unauthorised withdrawal incident, which tested CBE's operational nerves and public trust, to the hard choices between profit and national stability in managing chronic foreign currency shortage, Abe oscillated between technical detail and moments of rare and expressive candour. If he is kept awake at night, it is by the gap between public expectation and the country's collective willingness to shoulder the hard work of economic resurgence, a concern, he believes, that may matter as much as any figure on the balance sheet

Fortune: You recently stated that CBE has reclaimed 51pc of the market share, and last year, your total loan reached close to half a trillion Birr, with 88pc going to the private sector. How do you define the private sector, since a large amount of the loan goes to fertiliser and seed, and that goes to the farmers?

Abie Sano: We lost the opportunity to multiply our resources by lending about a trillion Birr only to the government. Had I lent that to the private sector, it would have been a different story. What we have been doing in the last three years could explain this. Our market share has been coming down for the previous 10 years because many banks are joining the market, sharing the same bread, and everyone is focusing on the CBE. For the last three to five years, it has been unique in the industry where the big microfinance institutions, which were historically CBEs' clients (depositors and borrowers), have themselves turned into commercial banks. Two things happened at the same time. One, they have taken all the deposits they have with CBE. They also became the CBE's major competitors, because we are now competing in the same market.

CBE is the bank that withstood this shock. About six microfinance institutions, which are very large, have moved out, and they have also moved out their assets, which were previously CBE's business. Between 2021 and 2023, we had to manage a major shock and were undergoing reform. All these challenges have now been addressed, and the reforms are solidified. CBE is now on a growth trajectory. It is now coming up. That is teh reason we are reclaiming our market share this year. You may have seen the current year's figure, which is quite far from many others. There was a significant growth, particularly from last year to this one.

Q: If you were to look at the broader economy, do you not think it has a positive impact that these microfinances have become full-fledged banks?

It has both sides. The financial sector lacks sufficient banks, not necessarily in number, but in capacity. Having more numbers could create some good ones out of that. That is the positive side. However, shifting microfinance institutions away from their core business, which helps the regions more, to commercial banking businesses is a loss to the region. They thought it was a good thing, but I have a different view. Usually, the experience elsewhere is not a success, unfortunately. Regional banks are often heavily influenced by regional governments and political cadres in various locations. They support the growth in the early stage of the honeymoon period, too. Later on, they began to request resources.

Then, regulators, usually central banks anywhere in the world, not only in Ethiopia, are often weak when it comes to regulating regional banks. The weakness of central banks often leads to bank mismanagement. It is observed in China, Brazil, and Argentina. It would be a miracle if our regional banks were successful. In most countries, the history of regional banks was a failure. We need to learn from that, and we need not wait for their failures.

Regional governments would attempt to shield the banks with a limited understanding of the issue. There is, however, an inherent risk of failure. If these banks act in line with the regional government's requirements, while they are commercial banks and do not receive any support, they should operate as commercial banks. They cannot use different standards. If they act like a commercial bank, they may not serve the needs of the regional governments. It would have complemented the regional governments' development plan if these banks specialised in certain areas, say agriculture, instead of acting like commercial banks.

The regulatory failure is another common problem that occurs everywhere, as regional governments often protect them and discourage central banks from regulating them. Unregulated banks cannot sustain unless they have extraordinary leaders who can prudently manage the institutions, which is very unlikely.

Q: But going through the shock you explained, can you say the worst is over for the CBE?

For the CBE, the worst is over. The period following the mass conversion of microfinance institutions and the associated withdrawal of deposits was one of the most difficult in our recent history. However, our reform agenda was already in motion, and this positioned us to absorb the shock and recover.

Q: What are the indications for that?

This is evidenced in the growth rates we have achieved over the past year, with asset and deposit figures rebounding strongly and, in some cases, surpassing even pre-shock levels. That recovery is not only quantitative, but also qualitative in that our deposit base is broader and more diversified than before, reflecting trust from different segments of society. What helped us most was that these reforms addressed some of the root causes that previously made us vulnerable, such as our historic dependence on large public sector exposures and a relatively undiversified customer base. With those challenges largely behind us, we have been able to return to a path of growth and recovery of market share.

However, the road ahead remains challenging, especially in areas such as foreign exchange management. Ethiopia has several national needs that put pressure on CBE as the country’s leading bank. For example, we are directly involved in financing fuel imports, which constantly pushes us to consume more foreign currency than we generate. This results in a persistent mismatch between our foreign assets and liabilities, exposing us to substantial foreign exchange risk.

In local mobilisation and domestic financial health, we are on a solid and accelerating growth trajectory. The structural changes we have undergone mean we are far more resilient than we were three years ago. The most destabilising shocks are behind us.

Q: But how about deposit mobilisation locally?

Deposit mobilisation has been progressing very well. Last year, for example, we mobilised over 515 billion Br, a dramatic increase from the 120 billion Br we recorded the previous year, and even higher than the 163 billion Br that was our previous high in 2020. That dip to 120 billion Br was temporary and connected directly to the outflow following the microfinance conversion shock, but we have now rebounded strongly.

This growth is not only the result of CBE’s internal efforts. Macroeconomic changes, including shifts in the broader financial sector, have contributed to improved deposit mobilisation. Our focus has been on adapting to our fair share of these changes and leveraging them to reinforce our foundation.

Q: CBE has 45 million customers. It exceeds 2.5 million Br and six million in daily transactions. While it remains the largest and the biggest in numbers, a regulatory shift is also underway in the industry. A few years ago, there were a few banks; today, there are more than 30. How are you planning to continue to evolve in the next three to five years, maintaining this position that you have, but not only to be the biggest bank, but also to be the most innovative?

Our strategy focuses on the private sector, encompassing not only the big players but also small and medium-sized borrowers, including individual households. This type of vertical diversification across different borrower classes strengthens our relationships and creates a multiplier effect, enhancing our overall business. Customers save with us to become eligible for borrowing, which, in turn, expands our pool of savers. This virtuous cycle is driving growth in domestic savings at a pace even faster than in the past.

Nonetheless, our figures are constrained by several factors, which people do not seem to understand, as we subsidise the economy. We are not acting like the private banks. Our rates differ from those of others, particularly given our substantial historical exposure to the public sector. We avail it at a very cheap rate; we were struggling with this one. Again, usually in banking, lending big money to a single entity is not the same as lending the same to many others. When you lend to many, you multiply your money, but when you lend to one, it is only one; it cannot multiply.

Q: Another factor is the potential or the possibility of foreign capital coming into the domestic financial sector. Indeed, the CBE will be impacted by that. You are now trying to restructure your balance sheet with the support of the World Bank.

The most extensive restructuring at CBE is fundamentally tied to our historical exposure to public enterprises. For years, much of our lending portfolio was directed toward public sector projects and entities, often in accordance with government policy. Many of these were extended on terms that were not optimal for the Bank’s financial health. This situation has been slowly rectified through a comprehensive restructuring process. All the outstanding loans and debts that were extended to public entities have been consolidated and transferred to the Treasury. This was necessary because much of this financing, especially for infrastructure, should have been handled by the government’s Treasury from the outset, rather than being carried on the CBE’s books.

Q: Aren't all the debts advanced to public enterprises covered by sovereign guarantee?

Although the Treasury provided sovereign guarantees, repayments lagged, and the Bank accumulated large receivables, particularly in the form of unpaid interest. The recent reforms have regularised these debts. Parliament approved the transfer of these accumulated loans, and crucially, the massive amount of previously unpaid interest was capitalised and incorporated as principal, now earning interest. As a result, CBE has begun receiving regular repayments, interest payments as scheduled and principal to follow after a three-year grace period. Our income from this source is improving, and for the first time in years, these assets are providing a steady revenue stream. This structural reform has strengthened our balance sheet and laid the groundwork for sustainable growth.

Q: CBE closed the 2023/24 financial year with an asset-to-equity leverage of 15 times, and its capital-to-asset ratio was 6.7pc. And obviously, this makes it the most leveraged bank in the financial industry. How comfortable are you with this level of exposure given the volatility in the economy? What are the safeguards to address such a level of exposure?

Although our leverage ratio appears high, the capital we are required to allocate is based on the risk profile of our asset portfolio. Historically, the majority of our loans were made to public sector borrowers, and since sovereign guarantees backed these, the risk to the Bank was minimal. Under Basel rules, such low-risk assets require less capital backing, which is why our ratio looks different from banks that lend primarily to riskier private sector clients. We have not been penalised for this structure, as it is consistent with international best practice.

Looking ahead, as more of our portfolio shifts toward private sector lending, which carries greater risk, we will need to increase our capital accordingly. We have already planned for this and sought approvals to raise our capital base further. Our capital position has improved substantially since. In recent years, the authorised capital has increased by 114 billion Br to over 200 billion Br, with the paid-up capital now standing at around 180 billion Br. This represents a considerable leap and exceeds the requirements outlined in the global Basel III standard, which governs capital adequacy for banks worldwide.

Our current capital adequacy ratio stands at an impressive 35pc, compared to an industry average of approximately 20pc. However, we anticipate this will decrease as our lending profile evolves and the grace period on the government debt expires. At that point, we will again raise capital to match our risk exposure and asset growth. For now, our buffers are robust, and our compliance with Basel III puts us ahead of the regulatory curve in Ethiopia.

Q: But the risk consideration is not only about capital.

Absolutely, risk management in banking extends far beyond capital allocation. At CBE, we have adopted and fully implemented the Basel III framework, which takes a more holistic approach to risk, encompassing liquidity, operational, market, and credit risk. We pride ourselves on being the only bank in Ethiopia to have fully embraced these standards across our operations.

One area where this has made a notable difference is in liquidity management. The market often hears that CBE is the only bank meeting its payment obligations consistently, even when others face liquidity pressures. This is directly tied to our adherence to Basel III requirements for liquidity coverage and stress testing. We have been proactive in preparing for both ordinary and extraordinary shocks, and this discipline has helped us through recent crises. Our risk culture now permeates all levels of the Bank. We have invested heavily in building the systems and human resources necessary not only to comply with global standards but also to exceed them. Our reforms, both in structure and in mindset, have been critical in allowing us to weather challenges and position the Bank for long-term leadership as the financial landscape in Ethiopia evolves.

Q: I think your asset has reached 2.3 trillion Br from your latest reporting. But it is growing by 15P.

In previous years, our growth lagged behind that of the private sector, particularly during the period when many new banks were being established and microfinance institutions converted into commercial banks, drawing deposits and assets away from the CBE. During this period, private sector banks sometimes recorded asset growth of 50pc or more, while ours was only 17pc. That was in 2021 and 2022, the height of the industry's structural changes. Many of the private banks’ gains were at our expense, as they absorbed the departing microfinance clients and deposits. Since then, the dynamic has shifted again.

Now, CBE is growing faster than the private banks. For example, in 2023/24, our asset growth was 48pc, compared to about 40pc for the private sector. This may seem surprising, but it reflects both a recovery from past shocks and new momentum in our business model. We are reclaiming market share and regaining our dominant position. This resurgence is the result of a deliberate reform program we launched over the last five years to solidify our foundations and make CBE competitive in both traditional and emerging areas of banking. The challenge ahead will be to sustain this trajectory in the face of potential new entrants, especially foreign banks, which are often perceived as a major threat but may struggle to compete with the scale, reach, and local knowledge that CBE brings to the market.

Q: What strategic considerations do you have to defend your market leadership position and continue to have your dominance not only competing with the existing private banks, but also with foreign banks that are expected to come, most likely from the region, I suppose, from Kenya, South Africa, perhaps Egypt?

When considering the competitive landscape, it is essential to understand the local context. In the past, the private sector’s growth outpaced ours as microfinance institutions transitioned and new banks were established, resulting in a temporary dip in CBE’s growth. That period of rapid private sector expansion has now tapered off, and CBE’s growth has rebounded. We expect this momentum to continue as we leverage our reformed operations and diversified services.

There is considerable discussion about the potential market disruption caused by the entry of foreign-owned banks. However, the reality is more nuanced. The costs of entering the domestic market are high, and new entrants will have to build their infrastructure from scratch. CBE, on the other hand, benefits from decades of investment, fully depreciated but functional assets, and a nationwide presence. Our cost structure is much leaner, and we have technological platforms comparable to those of global banks. Foreign banks will likely focus on areas related to foreign exchange, given the demand among international organisations. But in most other domains, it will be difficult for them to threaten CBE’s position immediately.

Even several private domestic banks are well-positioned to outperform new international entrants. I would say that the fear of foreign competition is often overstated, and we see CBE’s leadership as secure, provided we continue to innovate and maintain operational discipline.

Q: But do you have any fear?

I have no fear about the entry of foreign banks. Many people believe that these banks will arrive with vast sums of foreign currency, instantly capturing the market because of the acute need for dollars among local businesses. However, the reality is different. Foreign banks typically bring only their initial equity, perhaps 40 million dollars, which is not much in the context of our operations, where we routinely provide such amounts to single importers. Foreign banks are not allowed to bring capital from their home countries to finance local loans directly. They will have to mobilise savings domestically, like any other Ethiopian bank. The competitive threat is therefore limited by regulatory and market realities, not merely by capital.

Our primary vulnerability lies in the foreign exchange market, which is already a risk that CBE actively manages. But in the broader sense, foreign banks will not bring cost structures or technologies that we cannot match or exceed. Their entry will challenge us to keep innovating, but it will not dislodge us from our position of strength.

Q: Let me take you back to the reform process. If there is one thing that defines the reform more than anything else, what would that be for you? Would it be on the technology adaptation front, or would it be transforming the human capital that you have? With all the complications of a reform that is needed, what defines the most for you?

The defining characteristic of our reform has been a fundamental transformation of our asset structure. Previously, CBE’s loan portfolio was overwhelmingly concentrated in public sector exposures. At one point, over 90pc of our lending was to government entities. Many of these loans were long-term and not being repaid, yet CBE was still expected to pay taxes and dividends in cash based on accrued, but unrealised, interest income. This unsustainable structure led to severe liquidity problems and even a brief bank run in early 2020. Our liquidity ratio fell below the regulatory minimum, and we were forced to seek emergency assistance from the Central Bank.

In hindsight, this crisis was precipitated by both political decisions that mandated excessive lending to state-owned enterprises and by mismanagement within the Bank. The major reform has been the political decision to reverse this policy and restructure CBE’s exposure. Transferring non-performing public sector loans to the Treasury and receiving regular and market-rate payments has stabilised our balance sheet. This move laid the foundation for a broader shift toward risk-based management, customer-centric services, digitisation, and cost efficiency. Four pillars and two support pillars now underpin everything we do at CBE.

The risk-conscious bank element is the one that brought about the change in CBE's asset restructuring, which led the government to make the decision. Unless the government had made that decision, CBE would have gone bankrupt. Basically, that is a pillar that we have presented to the government. If we have to reform CBE, it should operate in the best risk-management approach; otherwise, it is dying, and that was evident.

Risk management principles now guide our lending policies. Every loan, whether old or new, should undergo rigorous assessment, and the overall portfolio is diversified to spread risk. This risk-conscious approach was critical in persuading government stakeholders that the previous model was unsustainable and that drastic reform was needed.

Customer centricity forms the second pillar of our reform. We now view customers not only as account holders but as partners whose needs shape our product offerings and service delivery. Previously, while the majority of savings mobilised by CBE came from the public, lending was still skewed toward the public sector. The new focus is on balancing resource allocation so that our lending serves the full range of clients, from individuals to businesses, and not only large state enterprises.

Digitisation is the third pillar. Our ambition is to be a digital-first institution, with robust mobile and online banking services, resilient IT infrastructure, and seamless transaction processing. Given the scale of CBE’s role in the national economy, even minor system outages can have outsized impacts. We have invested heavily in technology and systems maintenance, and our digital channels (mobile, card, and internet banking) are now among the most widely used in the country. These three pillars are supported by cost efficiency, which ensures that operational expenses grow more slowly than revenues, thereby further enhancing profitability.

Q: Last year, your deposit rose by close to 12pc.

Yes, last year was indeed challenging for deposit growth. The increase was our smallest in recent memory and reflected the aftershocks from the withdrawal of microfinance institution deposits and general liquidity pressures in the banking industry. This was a difficult period for all banks, not only the CBE, and it tested our ability to sustain public confidence and maintain our funding base. However, it is crucial to note that the underlying reasons for this slower growth were structural and temporary, not a sign of eroding trust or a fundamental weakness in our operations. Since then, deposit mobilisation has recovered strongly as we adapted our strategy, focusing on broadening our depositor base, expanding our digital offerings, and reaching more segments of society. As of the most recent year, our total deposits rebounded to 1.7 trillion Br.

CBE’s philosophy has always been to avoid competing for deposits solely based on high interest rates. Fixed-time deposits, which many private banks attract by offering high rates, are very expensive and can expose banks to liquidity and funding risks. Our approach emphasises stability, customer relationships, and prudent pricing, even if it means forgoing some high-cost deposits in the short term.

Q: Indeed that your fixed-time deposit has fallen by 28pc. What does that show you? Are you not worried that liquidity is shifting to short-term lending? How will this trend impact and affect your funding costs, lending capacity, and depositors' confidence in the CBE?

The decline in fixed-time deposits is not a concern for us. In fact, partly by design, we do not encourage fixed deposits because they are a very expensive form of funding. Some banks have been offering fixed deposit rates above 20pc, sometimes even reaching 23pc, to attract large depositors or to solve short-term liquidity crises. When you factor in the reserve requirements (you can only lend out 85pc of the deposit but pay interest on the full amount), the effective cost to the bank can exceed 30pc. This is unsustainable in the long term.

Our average rate for time deposits is only 7.5pc. That may not be attractive to those seeking the highest return, but it is a deliberate strategy. We would rather mobilise stable and lower-cost deposits from the public, rather than become dependent on a small group of high-cost and potentially volatile depositors. Our branch network and digital infrastructure enable us to reach a large base of savers, providing a healthier foundation for growth and resilience. Ultimately, this approach supports depositor confidence. We have never been forced to pay unsustainable rates to attract funds, nor have we faced a crisis where large depositors could pull out en masse and threaten our liquidity. Our funding costs remain among the lowest in the industry, allowing us to offer competitive lending rates to our customers. It is a model built for the long term, not for short-term gain.

Q: You observe in the industry that almost all banks pay for wages and administrative expenses much higher than what they pay for interest, which is their core business. Yours is not different?

That is an insightful observation, and it is a common issue in many banking markets. Ideally, a healthy commercial bank should allocate approximately half of its total expenses to interest paid to depositors, the core activity that generates its loanable funds. If wage and administrative costs are consistently outstripping interest expenses, it can be a sign of inefficiency or over-expansion.

At the CBE, historically, our interest expenses have always been higher than our wage and administrative costs. Last year, for instance, we paid 44 billion Br in interest, compared to 34 billion Br for salaries and other administrative expenses. This year, salaries have increased to 47 billion Br, outpacing interest for the first time, mainly due to a major upward adjustment in staff compensation. It is a deviation from the norm, but it was a necessary step to retain talent in a competitive market and reward performance during a challenging period.

Even so, our overall cost of funds remains low, and our efficiency ratios continue to improve thanks to ongoing investments in technology and process automation. We benchmark ourselves against international standards, and as digital adoption rises, we expect further productivity gains. We continually strive to strike the right balance between investing in our people and systems, and maintaining profitability for our shareholders while ensuring the safety of our depositors.

Q: Although it goes into the cost of resource mobilisation, what the industry pays for depositors is much lower than what it should be. The margin between deposit and interest is so wide that it is the public that is on the receiving end of this issue.

The apparent gap between deposit and lending rates can be misleading if viewed in isolation. People often look at the difference and assume that this is the net margin the banks are pocketing. In reality, that spread has to cover all the costs of running the bank, including salaries, technology, branch infrastructure, compliance, and, crucially, loan losses and provisioning. Here, the cost of running a nationwide banking network is considerable, and the regulatory environment requires us to maintain large reserves and invest in technology. Ultimately, even with a headline spread of, say, 16pc, the actual net interest margin after all costs is much lower. Competition is pushing lending rates down, and digitalisation is helping reduce some costs, but the industry is not yet at the scale or efficiency seen in more developed markets.

What matters most is transparency and responsible management. We are committed to ensuring that our rates reflect market realities and our own operational efficiencies. As the sector evolves and digitalisation takes hold, we expect these spreads to narrow further, benefiting customers and the broader economy.

Q: Based on the data that we have, private banks are performing better than CBE in average profit per employee. Last year, the amount was approximately 440,000 Br, which is less than 580,000 Br for Awash and 1.8 million Br for Zemen banks. What specific investments are you putting into technology and human capital to improve your efficiency, innovations, and fill the gap in productivity?

The data on profit per employee needs careful interpretation. Much depends on how you measure profit, the nature of a bank’s business model, and the composition of its asset base. At CBE, a significant portion of our lending has historically been directed towards the public sector, yielding returns that are significantly lower than those from private sector lending. When you compare our headline profit per employee to that of private banks, which lend primarily to the higher-yielding private sector, it is not an apple-to-apple comparison.

If we adjusted our portfolio and returns to match the private sector’s average rates, our profit per employee would be significantly higher. For the just-ended year, our profit per employee is 3.4 million Br, compared to the previous year's 1.85 million Br, already higher than the best-performing private bank in your sample. The reason for the earlier dip was an expansion of our staff by approximately 12,000; however, our overall trajectory remains positive and is expected to improve further as more of our lending shifts to the private sector.

To drive further gains, we are investing heavily in both technology and human capital. Our digital transformation agenda is delivering productivity improvements across all levels of the organisation. We are automating processes, investing in upskilling and reskilling our staff, and nurturing a culture of innovation. The ultimate goal is not simply to match but to exceed the productivity and efficiency metrics seen elsewhere in the industry, using the advantages of our scale, infrastructure, and talent pool.

Q: Let me come to the most delicate issue, which is foreign currency. In 2023/24, you have earned 3.2 billion dollars in foreign currency, but two-thirds of that comes from remittances. Considering the global economic situation, where almost every country is going through a tough time this year due to conflict and tariff wars, how much are you going to depend on remittances to generate foreign currency? What are your plans to diversify the source of your forex income? How much have you recovered from the big blow that you went through due to the foreign exchange regime policy change?

Foreign exchange generation remains one of the most complex and strategically essential challenges for CBE and for Ethiopia as a whole. In the past year, we generated the amount you mentioned. This heavy dependence on remittances is not unique to Ethiopia. Several developing countries face similar dynamics, particularly where export diversification is still in progress. We are under no illusions about the risks inherent in relying so much on remittance flows, especially given global economic headwinds. Our long-term strategy is to build a more substantial base of foreign currency earnings through increased support for exporters, particularly in goods such as coffee, which remains our largest export, and through the development of new sectors.

Policy changes in foreign exchange allocation and pricing, while painful in the short term, have begun to correct long-standing distortions. Exporters are now better incentivised, and we have seen an 84pc growth in export-generated foreign exchange, albeit from a low base. CBE is working to deepen its relationships with the diaspora, offering tailored digital products to facilitate remittances and direct investment. At the same time, we are cautiously increasing our lending to the export sector, learning from previous mistakes around risk management and collateral requirements. Our goal is to reduce our vulnerability to external shocks and to make our foreign currency inflows more robust, predictable, and diversified.

Q: The policy objective of the foreign exchange regime liberalisation is to bridge the gap between the parallel and the official markets and to eliminate the distortion in the economy. A year after liberalisation, you still have a high premium between the official rate and the parallel market. Do you consider the policy a failure, for it has not met its very policy objective?

It is difficult to characterise the policy as a failure or as not having achieved its objectives. Exchange rate unification is a complex and gradual process, especially in a country where speculation has historically played a considerable role. The IMF's own assessment shows that the official rate should be somewhere between 133 Br and 136 Br to the dollar, indicating that the currency is no longer as undervalued as it was before. The remaining difference, or premium, between the official and parallel market rates reflects a range of factors beyond supply and demand.

What has changed is the underlying structure of the market. Previously, the gap between official and parallel rates was extreme. At one point, the parallel rate was almost double the official rate. Now, although there is still a premium, it is much narrower, and the real sector is largely unified at the official rate. The illegal or parallel market persists mostly in financial transactions and is often tied to issues such as capital flight and informal cross-border trade, some of which are driven by geopolitical and security challenges.

The government and the central bank are working to close this gap further, but as long as there are incentives for capital to move unofficially, a perfect unification will be elusive. The direction of change, however, is positive, and the distortions are being gradually eroded. The key now is to stay the course, continue to strengthen regulation and transparency, and find ways to formalise more of the economy's foreign exchange flows.

Q: The foreign exchange market is not entirely liberalised when you see that it is somehow managed because you have a spread that is fixed at two percent, whether it is officially announced or otherwise, the banks are not competing based on the market. At the CBE, you often put the lowest rate, although there are some exceptions. Nevertheless, the CBE is the provider of the lowest forex rates. Are you trying to replace the Central Bank as a policy anchor bank?

This is a very difficult question. CBE’s vision is to become a world-class commercial bank and play a leading role in Ethiopia's economic transformation. This comes with significant responsibilities, including helping to stabilise the broader financial system. Our approach to setting foreign exchange rates is guided by a sense of responsibility, not only to our shareholders but to the broader economy and society. We are acutely aware of the impact that sharp and unjustified movements in exchange rates can have on ordinary people. If rates rise excessively without sound economic reasons, often because of speculative trading in the parallel market, the resulting inflation and volatility hurt households and businesses. We do not see it as our role to follow the parallel market wherever it leads, mainly when that market is being influenced by actors whose interests may be at odds with the country's stability.

The CBE’s position as the largest and most trusted bank means that our actions can help anchor expectations and moderate volatility. We do not operate in a vacuum. The stability of the financial sector and the economy is as important to us as our own bottom line. That is why, even when it might be possible to chase short-term profits by following the market up, we choose instead to act prudently, in the long-term interests of the country.

Q: But isn't this for the politicians and the policymakers to worry, and not you, the operator? Do you not have a responsibility to make CBE as profitable as you can?

That is a legitimate question, and it goes to the heart of what it means to be a responsible corporate citizen in a country like Ethiopia. While maximising profit is an essential goal for any bank, there are moments when broader considerations should take precedence. If the pursuit of profit would destabilise the economy or threaten the livelihoods of millions, then it is short-sighted and ultimately self-defeating. If Ethiopia were to lose its stability (economic, social, or political), there would be no CBE left to profit. Our institution’s fortunes are intimately tied to the fate of the country. That is why, in times of crisis, we have chosen to absorb shocks and protect our customers, even at the expense of short-term profitability. Long-term sustainability requires a healthy and functioning economy.

Commercial success and social responsibility are not mutually exclusive. On the contrary, acting in the public interest can reinforce trust, strengthen relationships, and create a more favourable environment for doing business. This philosophy underpins all our strategic decisions, from pricing to risk management.

Q: The economy grew by 8.1pc last year. However, year-on-year inflation averaged at 20pc, and the trade deficit was nearing 15 billion dollars.

These are sobering figures. The economy continues to grow, but persistent high inflation and a large trade deficit remain critical challenges. The structural imbalance between imports and exports continues to put ongoing pressure on foreign exchange reserves, making the management of monetary and fiscal policy extremely complex. From CBE’s perspective, these macroeconomic realities affect everything we do, from credit allocation to risk assessment. High inflation erodes the real value of savings, complicates lending decisions, and makes it harder for businesses to plan and invest. The trade deficit, meanwhile, means that foreign currency is always in short supply, placing a premium on prudent management and strategic planning.

We do our best to insulate our balance sheet from these pressures by diversifying our asset base, managing risk carefully, and maintaining a strong capital position. But ultimately, we operate within the broader economic environment and are subject to the same shocks and uncertainties as the rest of the economy. It is a constant balancing act, and it requires both vigilance and adaptability.

Q: How insulated is CBE's balance sheet from inflationary pressure, exchange rate volatility, and external shocks, including geopolitical and debt issues, that are beyond your control?

No bank is fully insulated from macroeconomic shocks. The best we can do is build resilience through prudent risk management, robust capital buffers, and diversified income streams. At CBE, we have made a deliberate choice to absorb much of the recent economic turbulence ourselves, rather than simply passing it on to our customers through higher rates or reduced services. Our lending rates have remained comparatively low, even as inflation and market rates have risen. We recognise that many of our clients are facing difficult times, such as global commodity shocks, supply chain disruptions, and local economic challenges. By absorbing some of these costs, we hope to help our customers survive the storm and continue repaying their loans, rather than pushing them into default and creating further problems down the line.

We monitor all these factors closely and adjust our strategies as needed. The current global and domestic situation is highly volatile, but we believe that CBE’s scale, experience, and prudent management practices put us in a strong position to weather whatever challenges may come our way. The key is to remain flexible and to act in the long-term interests of both the bank and the country.

Q: In March last year, you had a glitch where an unauthorised withdrawal of 801 million Br occurred, which you said you have recovered over 98pc.

That incident was unprecedented in CBE’s history and generated a great deal of public discussion, much of it based on misinformation. We recovered not only 98pc, but, in fact, more than 100pc of the withdrawn amount. We collected even more than what was lost, in some cases receiving repayments from multiple parties connected to the same transaction. The process was rigorous, and our recovery rate far exceeded the global average for similar incidents, which typically see less than a quarter of funds returned.

The glitch resulted from a breach of internal procedures during a software deployment. Our protocol is clear that any new product should pass through stages of development, testing, and preparation before being deployed into the live production environment, with several layers of oversight and approval at each step. In this case, overconfidence led to shortcuts, as the developers copied code directly from a live server rather than following standard procedure. One critical logic was omitted in the transfer, resulting in the reversal logic failing and creating unauthorised credits. It was a severe operational failure, but not an act of fraud.

We took the incident extremely seriously and conducted a lengthy investigation to determine accountability. Fifteen employees were penalised, and one manager was dismissed. It was a costly lesson for the Bank, not only in money but also in reputation. However, the process also revealed strengths. Our internal controls ultimately detected the problem, we recovered the funds, and the lessons learned have made us far stricter in our approach to IT governance and system changes. Now, every change is scrutinised even more closely before going live.

Q: One of the criticisms against you on the recovery process was that you did not follow the law, that you harassed your customers. You used your leverage. You basically coerced your customers into returning the money. Why did you choose that path? Wasn't there any better path than that?

This is a complicated and sensitive matter. It is easy for people to criticise the recovery approach without appreciating the constraints we faced. The scale of the incident was such that conventional legal processes were impractical, for over 25,000 customers were involved. Our initial efforts focused on legal action. We attempted to bring the largest cases to the police and the courts, but the justice system was not equipped to handle such a volume of instances simultaneously.

With no adequate legal precedent and a clear need to protect the Bank’s depositors, we were forced to innovate. We began by issuing public notices, requesting that people return the money. Only after repeated warnings did we resort to publishing the names and, eventually, photos of those who had not repaid significant amounts. This method, although unconventional, proved highly effective, as 95 million Br was returned in a single day following the publication of the names. It was not a decision taken lightly, but it was necessary under the circumstances to safeguard the Bank’s assets and protect public funds.

Throughout the process, we took care to give people the opportunity to return the money voluntarily before taking further action. We only published photos for the largest outstanding cases and provided ample time for repayments. We understood the controversy, but we believed it was in the public interest. Our overriding responsibility was to our depositors and the stability of the Bank, and we are confident that we acted with integrity under extraordinary circumstances.

Q: Another controversy was with the plan to change CBE's logo. I believe that you have gone through a corporate rebranding exercise. What exactly did you plan with the logo? What is the reason for that? Why have you backtracked and retreated?

The logo issue is indeed delicate and has been widely misunderstood in the public domain. There has never been a plan to discard our beloved current logo entirely. We are deeply attached to it, as are millions of Ethiopians, and we recognise its value as a national symbol. The discussion has always centred on making technical enhancements to ensure the logo is compatible with our future as a digital-first bank. The problem with the current logo is that it is a 3D design, which does not render well across all digital platforms and print formats. As we advance our digital strategy, the need for a more versatile and adaptable logo has become evident. However, the public’s attachment to the current logo is strong, and we were not ready to force a change at the expense of sentiment or understanding. Negative media coverage added to the confusion, often mischaracterising the issue as an abandonment of tradition or wasteful expenditure.

In reality, any change would be incremental, focused on resolving technical issues rather than wholesale rebranding. We have decided to retain the existing logo for now and will only revisit the matter when the timing and technical requirements justify it. The public narrative has not always accurately reflected the facts, but we remain committed to transparency and will make changes only in the best interests of the bank and its stakeholders.

Q: You talked about CBE's first strategy as a digital-first bank, which will require you to downsize your staff substantially because the more digitised you become, the fewer people you need. CBE is the largest employer in the industry. Are you not worried about the social impact of not hiring as many people as you used to or laying off a large number of people because you do not need that many people?

The digital transformation of CBE is not intended to result in mass layoffs or sudden reductions in staff. While it is true that some operational roles may become redundant as automation and digital channels expand, our strategy is to manage this transition gradually through natural attrition and redeployment, rather than by large-scale job cuts. Each year, there is a natural turnover as employees retire or move on, and we will reduce the rate of new hiring to manage overall staff levels. At the same time, the shift to digital banking opens up new roles and opportunities, especially in IT, customer support, and digital service delivery. We plan to repurpose existing staff where possible, providing them with training and support to enable a smooth transition into new functions. We recognise the importance of our workforce, not only as employees but as ambassadors of the Bank and trusted points of contact for our customers.

While we will not continue hiring at the same pace as in the past, there remains a need for skilled people in new areas. The number of branches may not increase dramatically, but our digital operations, call centres, and customer engagement platforms will all require new talent. Our goal is to balance efficiency with social responsibility, and to ensure that the benefits of digitalisation are shared as broadly as possible.

Q: Running such a mammoth financial institution that mobilises over 80pc of the country's finances, with all its history, responsibility to its employees, the owners, depositors, borrowers, what wakes you up in the middle of the night? What worries you so deeply?

Many things keep me up at night, but perhaps the biggest worry is the gap between the expectations and needs of our society and the willingness to make the sacrifices necessary to achieve them. There is a profound demand for progress, services, and prosperity, but not always an equal commitment to work, innovation, or productivity. This mismatch is made worse by social media, which often fuels unrealistic hopes or amplifies blame rather than responsibility.

My concern is that if this gap persists, it could create economic or political instability. If people believe their challenges are always someone else's fault, rather than looking for ways to solve them, it breeds resentment and division. That is a dangerous path for any society. As someone entrusted with a leading financial institution, I feel a deep responsibility to do what I can to bridge this divide through financing, job creation, and innovation.

There are positive signs, though. I see that more people are taking on additional work, demonstrating entrepreneurial spirit, and utilising local resources to improve their lives. But as a country, we still have a long way to go. The source of our poverty is not only a lack of resources, but a need to change our mindset about work and responsibility. My greatest hope is that we can foster a culture of initiative, resilience, and mutual support; my greatest fear is that we will not move quickly enough to avoid the risks that come from complacency and blame.

PUBLISHED ON Sep 06,2025 [ VOL 26 , NO 1323]